Got Cash? Park It In 3-Year Treasuries – Samson

By Michael Aneiro

Investors are often advised to keep cash on hand, both for safety and in case an investment opportunity arises, that they won’t need to sell something else to pounce on a bargain. But what’s the best way to hold cash? In a money-market fund? A savings account? Jonathan Lewis, chief investment officer at Samson Capital Advisors, says investors should look to 3-year Treasuries. From Lewis:

With the recent spate of firm economic data, and healthy equity markets giving investors the bond market blues, three-year maturity treasuries are being overlooked as a great place to invest for conservative, yield hungry investors.

Three year treasuries, which now yield nearly 1%, are almost double the yield they offered investors in late 2013. The short end of the treasury yield curve is very sensitive to expectations of a Fed tightening, but unless you believe the Fed will tighten rates aggressively soon, it is tough to construct a scenario where these bonds underperform T-bills yielding almost 0%. For example, for investors with a 1-Year outlook, rates would have to rise 45 basis points on these bonds before their total return falls beneath 7 basis points. Unless you believe the Fed is truly about to wage an aggressive war against growth and inflation, this is a very unlikely event. Investors with cash on the sidelines, should look at short to intermediate treasuries, rather than sitting on cash at this time.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.